Understanding what moves the Phillips curve is important to monetary policy. Because the Phillips curve has experienced over time movements similar to those characterizing the Beveridge curve, the authors jointly analyze the two phenomena. They do that through an agent-based macro model based on adaptive micro-foundations, which works fairly well in replicating a number of stylized facts, including the Beveridge curve, the Phillips curve and the Okun curve. By Monte Carlo experiments they explore the mechanisms behind the movements of the Beveridge curve and the Phillips curve. They discovered that shifts of the Beveridge curve are best explained by the intensity of worker reallocation. Reallocation also shifts the Phillips curve in the same direction, suggesting that it may be the reason behind the similarity of the patterns historically recorded for these two curves. This finding may shed new light on what moves the Phillips curve and might have direct implications for the conduction of monetary policy.

Comments and Questions

Enrico Scalas
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Previous ABM work on Okun's and Beveridge's curves

December 14, 2018 - 18:39

I would like to mention that Aoki and Yoshikawa in their book
M. Aoki and H. Yoshikawa
Reconstructing Macroeconomics
Cambridge University Press, 2007
present simple agent-based models and derive Okun's law and Beveridge's law.
The interested reader can consult Chapter 7.